AFC Retirement & Investment Planning 5

Question 1

A client aged 73 fails to take the required minimum distribution (RMD) from her traditional IRA for the year. What is the excise tax penalty on the amount not withdrawn?

Accepted Answer

25%

Answer

10%

Answer

50%

Answer

75%

Question 2

Which of the following best describes sequence-of-returns risk in retirement planning?

Accepted Answer

The risk that poor returns early in retirement deplete a portfolio before recovery

Answer

The risk that inflation outpaces investment returns over time

Answer

The risk of outliving Social Security benefits

Answer

The risk that bond yields fall below the dividend yield

Question 3

A married client wants to maximize surviving spouse income from Social Security. Which strategy is generally most beneficial if both spouses have worked?

Accepted Answer

The higher earner delays claiming until age 70

Answer

Both spouses claim at age 62 simultaneously

Answer

Both spouses claim at full retirement age

Answer

The lower earner delays to age 70 and higher earner claims at 62

Question 4

What distinguishes a SIMPLE IRA from a SEP IRA for a self-employed client?

Accepted Answer

SIMPLE IRAs require employee elective deferrals and employer matching, while SEP IRAs are employer-only contributions

Answer

SIMPLE IRAs allow higher contributions than SEP IRAs

Answer

SEP IRAs allow catch-up contributions for those over 50

Answer

SIMPLE IRAs have no vesting schedule while SEP IRAs have 3-year cliff vesting

Question 5

A client near retirement is concerned about interest rate risk. Which bond investment would be MOST sensitive to interest rate changes?

Accepted Answer

A 30-year corporate bond

Answer

A 2-year Treasury note

Answer

A 6-month Treasury bill

Answer

A 5-year TIPS bond

Question 6

A client wants to leave retirement assets to charity and minimize taxes for heirs. Which strategy is most tax-efficient?

Accepted Answer

Leave traditional IRA assets to charity and Roth IRA or taxable accounts to heirs

Answer

Leave Roth IRA assets to charity and taxable brokerage accounts to heirs

Answer

Leave all assets equally between charity and heirs

Answer

Convert all IRAs to Roth before death and leave them to charity

Question 7

Which of the following is the primary purpose of the 4% withdrawal rule in retirement income planning?

Accepted Answer

Provide a sustainable withdrawal rate that avoids depleting a portfolio over 30 years

Answer

Minimize taxes in the first decade of retirement

Answer

Maximize income by investing entirely in equities

Answer

Ensure RMD compliance after age 73